Why Audi Created a New Business Devoted to Self-Driving Tech

Audi's self-driving A7 made a 560-mile road trip from Silicon Valley to Las Vegas in 2015. A Fortune reporter was one of five journalists to experience an autonomous car.Photograph by Jim Fets

Audi, the German automaker owned by Volkswagen Group, has started a new subsidiary focused on autonomous driving as it pushes to deploy the next-generation technology beyond the confines of its own brand.

The new subsidiary is called Autonomous Intelligent Driving and it will work for the entire Volkswagen Group, Audi AG CEO Rupert Stadler said Wednesday during the company’s annual meeting. The subsidiary will be based in Munich. Stadler didn’t say how much the company planned to invest into this new business.

Volkswagen Group owns Audi, Porsche, Volkswagen Passenger Cars, as well as Bentley, Bugatti, Lamborghini, and overseas-brands SEAT and Skoda.

“We see potential for highly automated driving also in the city, where traffic is highly complex; this is the ultimate test for us,” Stadler said, according to a transcript of his remarks. “In the next decade, we will also have robot taxis. They will close the gap in urban public transport. We will first experience cars without a steering wheel and pedals on predefined short journeys.”

Audi is pursuing autonomy via two primary pathways. Audi will continue to develop driver assistance and piloted systems for its luxury vehicles. For instance, in the new Audi A8, customers will be able to use Level 3 automated driving in traffic jams at speeds up to 35 miles per hour. Level 3, or conditional automation, is a classification by the Society of Automotive Engineers that means the car can handle all aspects of driving with the expectation that the human driver will respond to a request to intervene.

Meanwhile, engineers will work on self-driving systems for other unconventional means of moving people from Point A to Point B in cities, such as driverless taxis.

Audi has been the driving force within the Volkswagen Group for more than a decade thanks to its autonomous driving technology. Audi’s earliest efforts began in 2005, when it teamed up with Stanford University for DARPA’s Grand Challenge for automated vehicles. The team was the fastest to complete a 150-mile course and won the challenge.

Stadler didn’t provide many details about this new business. However, based on his remarks that it’s open to cooperation with partners in the automotive and IT sectors, it will likely be similar to how the digital map company HERE has evolved. German automakers Audi, BMW, and Daimler bought the former Nokia unit for $2.9 billion in an effort to build a global map and location database that avoids any reliance on information from Apple or Google.

Stadler’s comments are in line with an emerging trend within an industry that has historically favored separation over collaboration. A number of automakers are acquiring startups and partnering at an accelerated rate with tech companies in the race to deploy autonomous vehicles. Meanwhile, tech companies are also busy snapping up or forming alliances with other automotive companies.

Intel’s $15.3 billion acquisition of computer vision systems supplier Mobileye is just the latest example of a string of activity in the industry.

Stadler also presented the company’s plan to launch three battery-electric models by the year 2020 and to electrify additional model series after that date.

Even as Stadler charts out the company’s plans for the future, a more scandalous past threatens to derail it.

German prosecutors raided the offices of Audi on Wednesday, further increasing the pressure on Stadler. Prosecutors raided nine Audi locations throughout Germany and were the first targeting the unit since Volkswagen diesel emissions scandal broke a year and a half ago.